Lifestyle’s 2015 results have no impact on its ratings

Moody’s Investors Services says that Lifestyle International Holdings Limited’s 2015 results have no impact on its Baa3 issuer rating.

The rating outlook remains stable.

“Despite the weak retail markets in Hong Kong and China, Lifestyle maintained stable revenue and operating profits in 2015. Combined with its flat debt leverage compared to a year ago, this resulted in a credit profile appropriate for its Baa3 ratings,” says Lina Choi, a Moody’s Vice President and Senior Credit Officer.

“While the negative sales growth trend in the first two months of 2016 point to increased operating challenges, we expect Lifestyle will maintain credit metrics consistent with its Baa3 ratings in the next 12-18 months,” adds Choi, who is also the Lead Analyst for Lifestyle.

Lifestyle recorded 1.6% year-on-year gross sales proceeds growth to HKD13.8 billion in 2015 from HKD13.6 billion in 2014. Driven by 2.3% revenue growth at SOGO Causeway Bay and SOGO Tsim Sha Tsui, Hong Kong and a strong performance in Shanghai Jiuguang, the group’s total revenue grew by 3.4% to HKD6.2 billion from 2014 levels.

Gross sales proceeds declined by low-teen percentage points in the first two months of 2016 from the same period last year, pointing to increasing operating challenges. Lifestyle plans to lengthen promotion periods over the course of the year to avoid repeating the magnitude of revenue declines seen in January-February 2016.

Meanwhile, Lifestyle’s adjusted EBITDA was around HKD3.1 billion in 2015, flat when compared with 2014 levels. Moody’s estimates the company’s profitability, as measured by adjusted EBITDA/gross sales proceeds, was 22%-23% in 2015, also largely stable from the above 20% reported since 2010.